After this week’s testimony in the impeachment hearings, the contours of President Donald Trump’s abuse of power for personal advantage have become crystal clear. Trump violated U.S. law when he solicited the interference of a foreign power in an American election. Looking ahead to 2020, Trump demanded the new Ukrainian President Volodymyr Zelensky announce an investigation into former Vice President Joe Biden and his son Hunter, a former board member of energy company Burisma. The “favor” Trump sought also featured a backward-looking conspiracy, one which would clear Russia of 2016 election tampering by magically locating the hacked DNC server in Ukraine. And to extort the cooperation of a desperate front-line American ally fighting Russian-backed forces, Trump threatened to withhold roughly $400 million in U.S. military assistance supported by both parties in Washington. The president’s scheme to put his personal gain over U.S. national security interests failed only because he got caught.
But there may be another area of Trump’s Kyiv corruption in which American interests provided air cover for the skullduggery of his syndicate. It was suggested by a little-noticed July 7, 2019 headline from the UAWire, “Ukrainian President Zelensky: only Trump can stop Nord Stream 2 pipeline.” As the Kyiv Post reported the next day, “Zelensky believes Trump can solve issue of Nord Stream 2 in favor of Ukraine.” As the new Ukrainian president explained:
“The only solution to this issue is that I will have a meeting with the U.S. president. This is the only person who, I am sure, will resolve this issue in the interests of Ukraine.”
As we’ll see below, Ukrainian and American policy makers have compelling strategic reasons for opposing the new Russian pipeline that will double Moscow’s capacity to deliver natural gas to markets across central and western Europe without paying transit fees to Kyiv. But stopping Nord Stream 2 in favor of American exports of liquified natural gas (LNG) to Ukraine and developing new sources there could enable some people in both countries to become very, very rich. People, that is, with names like Igor Fruman, Lev Parnas, Dmytro Firtash and others associated with President Trump’s personal attorney Rudy Giuliani and his Energy Secretary Rick Perry.
To be sure, American presidents of both parties have worried for decades about Europe’s growing dependence on Russian oil and natural gas. Germany’s desires for a lower cost, reliable alternative to coal, oil and, later, nuclear power have prompted Berlin to push for pipeline deals with the Moscow dating back to the late 1970s. While the Carter and Reagan administrations fretted then about the prospect of Soviet leverage over Bonn, Presidents Bush and Obama worried about a Russian economic stranglehold over Germany with the building of the first Nord Stream pipeline project which became operational in 2011. As the New York Times reported on October 7, 2019, consternation in Washington, Warsaw, and Kyiv only increased as Nord Stream 2 progressed toward completion:
President Trump said “it really makes Germany a hostage to Russia.” Senator Ted Cruz, Republican of Texas, said it would encourage Russian “military adventurism.” Radoslaw Sikorski, the former Polish defense minister, compared it to the infamous 1939 Molotov-Ribbentrop Pact that allied the Nazis with Stalin’s Soviet Union. [...]
The pipelines run from Russia directly under the Baltic Sea to Germany, bypassing Poland and Ukraine and denying those countries some transit fees. Gazprom, which is majority owned by the Russian government, owns 51 percent of Nord Stream 1 and all of Nord Stream 2 AG, which is developing and will operate the new pipelines.
Critics, including those from the United States, which would like to sell Europe more liquefied natural gas, say they are not simply concerned that Germany will become too dependent on Russian gas as it weans itself from nuclear power and coal. They also fear that Russia’s larger intention is to starve Ukraine of an important chunk of income. Russia is waging a kind of war in the eastern part of Ukraine after annexing Crimea in 2014.
While the 9.5 billion-euro project which will double Nord Stream 1’s capacity to 110 billion cubic meters, Vladimir Putin will be starving Ukraine’s coffers even as he fills his own. “European exports represent the bulk of Gazprom’s profits, and those are vital for the Russian state,” the Times explained. “Oil and gas production accounts for 40 percent of Russia’s budget.” At the same time, Mikhail Korchemkin warned in Foreign Policy last month, “It will actually concentrate Russian gas exports into a single pipeline corridor in the Baltic Sea, where it will bypass Ukraine and reduce that country’s gas load to 10 percent of current capacity.” Given Russia’s past shutting of the spigots, Poland, Lithuania, Estonia, Latvia, Moldova, and other former Soviet satellites now integrated into NATO fear becoming hostage to Moscow, too. As the Atlantic Council reported on Wednesday, Poland’s former Prime Minister Mateusz Morawiecki warned two years ago:
“Once Nord Stream 2 is built, Putin can do with Ukraine whatever he wants, and then we have potentially his army on the eastern border of the EU.”
With the Danish government having given its blessing to the section of the Nord Stream 2 pipeline to be built in its territorial waters, the project stands only a few months from completion. Meanwhile, committees in both the U.S. House of Representatives and the Senate have passed bipartisan sanctions bills targeting companies working on the pipeline. President Trump is expected to sign both before the end of the year. The goal is to buy time for alternative sources of natural gas—shipped from the United States, unearthed in Ukraine and delivered via new pipelines from Turkey—to reduce Eastern Europe’s vulnerability to a Russian energy stranglehold.
Sadly, President Trump’s approach to German Chancellor Angela Merkel has been anything but diplomatic. As Josef Joffe suggested in a March Washington Post op-ed, Donald Trump is providing a textbook example of how to lose friends and alienate allies:
Trump has repeatedly insulted Berlin, levying punitive tariffs and threatening to choke off intelligence-sharing if Berlin allows Huawei to build Germany’s 5G network. And he has threatened sanctions over Nord Stream 2. With friends like Trump, who needs enemies?
Enemies, indeed. At the NATO Summit in July 2018, Trump claimed Germany is "captive to" and "totally controlled" by Russia because of the planned Nord Stream 2 gas pipeline. But if “Trump wants Germany—an enormous gas purchaser—to buy American liquefied natural gas and is attempting to steal the market now held by Russia,” his inflammatory rhetoric is putting the close ties between Berlin and Washington at risk. The day Trump tweeted:
“What good is NATO if Germany is paying Russia billions of dollars for gas and energy? The U.S. is paying for Europe’s protection, then loses billions on Trade. Must pay 2% of GDP IMMEDIATELY, not by 2025.”
During a June 2019 White House appearance with Polish President Andrzej Duda, Trump complained that “We’re protecting Germany from Russia, and Russia is getting billions and billions of dollars in money from Germany.” The European firms partnering to build the pipeline (Germany's Wintershall and Uniper, Anglo-Dutch Shell, France's Engie and Austria's OMV) and some 600 other companies involved in the project could yet face those threatened U.S. sanctions. And as Bloomberg (“Trump Threatens Merkel With Pipeline Sanctions, U.S. Troop Cut”) recounted, that’s not all he said.
Donald Trump upped his criticism of Germany on Wednesday as he threatened sanctions over Angela Merkel’s continued support for a gas pipeline from Russia and warned that he could shift troops away from the NATO ally over its defense spending.
For its part, Russia has accused the Trump administration of “blackmail.”
All of which raises an interesting question. Given the dozens of circumstances in which Donald Trump has gone “soft” on Russia, why did the president focus only on Nord Stream 2 to oppose Vladimir Putin? What reasons could there be for Team Trump to actually act in support of American national interests in balking on the pipeline which largely cuts Ukraine out of Europe’s natural gas market?
Measured in dollars, there are billions of them for Trump’s associates. As the Brookings Institution recently detailed:
These new pipelines reflect a decision taken by Moscow more than a decade ago to find ways to get gas to Europe that circumvent Ukraine. The Russian government and Gazprom seek to eliminate Gazprom’s dependence on Ukrainian pipelines as well as to end the transit fees that last year generated $3 billion in revenue for Kyiv.
As Russia has reduced its dependence on Ukraine for transiting gas, Kyiv stopped importing gas directly from Russia for Ukrainian use in 2015, instead bringing gas in from Poland, Hungary, and Slovakia. That gas fills about one-third of Ukraine’s needs, with domestic production satisfying the remainder.
That’s where Rudy Giuliani and his friends Igor Fruman and Lev Parnas come in. As you’ll recall, Fruman and Parnas were arrested and indicted on criminal charges for allegedly funneling foreign money into U.S. elections. As it turns out, they were on their way to Vienna on October 11, where Giuliani was supposed to join them the following day. Vienna also happens to be the current home of Dmytro Firtash, the Russian mob-linked criminal now trying to avoid extradition to the United States over bribery charges. Firtash, who like convicted Trump campaign manager Paul Manafort supported the massively corrupt pro-Russian former Ukrainian President Viktor Yanukovych, was worth some $500 million by 2014 courtesy of his lucrative business with Gazprom shipping natural gas from Russia to Ukraine. As Reuters reported on October 11, Firtash has employed Parnas and Fruman since at least early 2018. And that’s not all. As Dan Friedman reported in Mother Jones last month:
As Parnas and Fruman helped Giuliani do opposition research for Trump, they were also pursuing a lucrative natural gas deal involving Naftogaz, Ukraine’s state-run oil and gas company. At an energy conference in Houston in March, Parnas and Fruman—accompanied by Harry Sargeant III, a billionaire oil magnate who lives in Florida—met with Andrew Favorov, a top deputy to Naftogaz CEO Andriy Kobolyev. As the AP first reported, Parnas and Fruman pressed Favorov to agree to a plan in which they would help him replace Kobolyev as Naftogaz’s chief. Parnas and Fruman hoped to then partner with Favorov on a scheme to export up to 100 tankers per year of US liquified gas to Naftogaz, which is eager to reduce its reliance on Russian gas. Favorov reportedly rejected this proposal, which he perceived as “a shakedown,” the AP story said.
But the biggest impediment to their scheme was then-U.S. Ambassador to Ukraine Maria Yovanovitch. Yovanovitch was at the forefront of American anti-corruption efforts in Kyiv. And CEO Kobolyev, as she testified to the House Intelligence Committee, had played a major role in cleaning up the systematic corruption within Naftogaz. As the Washington Post reported:
The gas giant’s financial performance has improved under Kobolyev. When he took over in March 2014, Naftogaz was losing billions of dollars a year. Last year it turned a profit and contributed 15 percent of the government’s revenue, through tax and dividend payments…
In her testimony to House impeachment investigators last month, Marie Yovanovitch, former U.S. ambassador to Ukraine, called Kobolyev “as clean as they come,” saying he had been “fearless and determined to sort of shake everything up.”
Which is why Fruman, Parnas, Rudy Giuliani and, apparently, Donald Trump needed to get Ambassador Yovanovitch out of the way. She was, after all, “bad news” when it came to extorting Ukrainian President Zelensky into announcing an investigation into Joe Biden, Hunter Biden, Burisma and CrowdStrike. And for Giuliani, she was going to be a problem if he hoped to turn his $500,000 for working with Parnas and Fruman into something much, much larger.
As it turns out, Rudy Giuliani now has bigger problems closer to home. Federal prosecutors from the Southern District of New York (SDNY) are now investigating Giuliani himself for possible campaign finance violations and failing to register as a foreign agent. And that’s not all. As the Wall Street Journal revealed on November 15, “Federal prosecutors in New York are investigating whether Rudy Giuliani stood to profit personally from a Ukrainian natural-gas business pushed by two associates who also aided his efforts there to launch investigations that could benefit President Trump.” Among those to be interviewed is that Naftogaz deputy director, Andrew Favorov.
But Rudy Giuliani and his amigos Lev and Igor aren’t the only ones who may have stood to profit in the Ukrainian natural gas market if Nord Stream 2 was delayed or unfinished. Secretary of Energy Rick Perry had some friends—and donors—from his home state of Texas who stood to gain as well.
To be sure, Rick Perry’s role has seemed murky from the beginning. Back in early October, Trump suggested (falsely, we now know) to House Republicans that the fateful July 25 telephone call with President Zelensky was all Perry’s idea.
[The president] said something to the effect of: “Not a lot of people know this but, I didn’t even want to make the call. The only reason I made the call was because Rick asked me to. Something about an LNG [liquified natural gas] plant,” one source said, recalling the president’s comments. 2 other sources confirmed the first source’s recollection.
But if that was nonsense, Perry’s place among the “three amigos” had at least one vital objective. During his visits with President Zelensky following his inauguration, Perry made it clear that he wanted Naftogaz to replace American board members with people “reputable in Republican circles.” But Perry wasn’t just talking about Amos Hochstein, a former diplomat and energy representative who served in the Obama administration, who like Ambassador Yovanovitch had defended Naftogaz CEO Kobolyev. Instead, New York Magazine documented, Perry wanted all of the Obama-era people out:
A second meeting during the trip, at a Kiev hotel, included Ukrainian officials and energy sector people. There, Perry made clear that the Trump administration wanted to see the entire Naftogaz supervisory board replaced, according to a person who attended both meetings. Perry again referenced the list of advisers that he had given Zelenskiy, and it was widely interpreted that he wanted Michael Bleyzer, a Ukrainian-American businessman from Texas, to join the newly formed board, the person said. Also on the list was Robert Bensh, another Texan who frequently works in Ukraine, the Energy Department confirmed.
But while the Trump White House stenographers at Politico reported on October 5 that “Energy Secretary Rick Perry urged Ukraine's president to root out corruption and pushed the new government for changes at its state-run oil and gas company,” the truth was far more insidious. Bensh and Bleyzer were Texas-based investors with connections to Perry. Bleyzer had been appointed by Perry to the board of a Texas state technologies fund, and in 2010, Bleyzer donated $20,000 to Perry’s reelection campaign. And as it has turned out, Bleyzer ended up securing something more valuable than an adviser’s role.
As the AP reported on November 11, Bleyzer and another Perry crony Alex Cranberg won a contract for natural gas exploration in Ukraine. They were chosen by Kyiv over a subsidiary of Naftogaz despite coming in with a higher cost bid:
Two political supporters of U.S. Energy Secretary Rick Perry secured a potentially lucrative oil and gas exploration deal from the Ukrainian government soon after Perry proposed one of the men as an adviser to the country's new president…
Ukraine awarded the contract to Perry's supporters little more than a month after the U.S. energy secretary attended Zelenskiy's May inauguration. In a meeting during that trip, Perry handed the new president a list of people he recommended as energy advisers. One of the four names was his longtime political backer Michael Bleyzer.
A week later, Bleyzer and his partner Alex Cranberg submitted a bid to drill for oil and gas at a sprawling government-controlled site called Varvynska. They offered millions of dollars less to the Ukrainian government than their only competitor for the drilling rights, according to internal Ukrainian government documents obtained by The Associated Press. But their newly created joint venture, Ukrainian Energy, was awarded the 50-year contract because a government-appointed commission determined they had greater technical expertise and stronger financial backing, the documents show.
As the Associated Press also documented, Bleyzer had ties to Rudy Giuliani. In 2008, Bleyzer’s firm hired the law firm of Bracewell & Giuliani to help it acquire and consolidate cable holdings in 16 Ukrainian cities, including Kyiv. That same year, Michael Bleyzer contributed $2,300 to Giuliani’s failed presidential campaign.
Anti-corruption law professor Jessica Tillipman of George Washington University said Perry likely did nothing illegal even if he sought to influence foreign officials to award contracts to his friends. "My gut says it's no crime," she said. "It's just icky."
Icky, indeed. After all, President Donald Trump is facing impeachment for his failed attempt to bribe Ukraine into interfering in an U.S. election for his personal gain, not for American national interests. In justifiably opposing the Nord Stream 2 natural gas pipeline, an awful lot of people in Trump’s orbit stand to make an awful lot of money whether he succeeds or not.